A hung Parliament does not solve the deficit crisis

Some of the advocates of a hung Parliament see it as a way of avoiding hard choices. Some indeed are starry eyed about a new kind of politicis that would result, with all the parties and politicians “having to get on with each other” and with the parties choosing the best policies from each for a coalition governent. Dream on.

In practise a hung Parliament could bring out the worst in many politicians. There would be a scramble for jobs, horse trading on policies to try to find a way of securing the most jobs for a given party, and an ultimate package that failed to tackle the deficit crisis because the easy way out for many politicians would appear to be spending more money they do not have.

We know Mr Brown wants to cling on to power. We learn today that Mr Clegg wants half the Cabinet posts in any hung Parliament for Lib Dems, so the bargaining has already begun in an unseemly way before the electorate have spoken. Of course it would be nice to have the Lib Dem tax cut without the large and partly unspecified Lib Dem tax rises, to have some extra front line spending on better schools or healthcare without cuts to pay for it, but that is simply unrealistic.

If we do not elect a government that is serious about controlling the deficit, the deficit will come to control us. The Greeks today are protesting and complaining about the IMF, saying the IMF wants them to cut too much. They should have thought of that before needing an IMF loan. They have lost control of their country and its policies because they overspent. There is a danger the UK could do the same thing, a danger intensified if we do elect a hung Parliament with too many new MPs who think they can borrow and spend other people’s money with a view to promoting themselves into the Ministerial limo.

It is a bit rich that the Greeks blame the money lenders who are coming to their aid at a price – they should be grateful that the IMF and the EU are prepared to lend them more at a lower interest rate than the markets demand. If they were wise they would get on with sorting out their finances, so they do not need the begging bowl.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

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32 Comments

So we will turn from electing a PM on the basis of their party's avoidance (in front of the electorate) of the debt issue, to having to appoint a PM on the basis of their firmness (in front of the IMF) in confronting it. And the past masters at this particular form of honesty and consistency are the Labour Party, who could end up with the lowest % poll and the highest number of seats.
The system is screaming for proper change, not just running to the nearest bloke with an earnest look and a good line in being the straight Joe.

The Conservative party has in fact squandered the lead it once had by deserting core voters and making itself indistinguishable from the others. Cameron has proven he is untrustworthy on the EU by reneging on his cast iron promise, and has promised to increase our expenses dramatically by his global warming madness, so nothing to choose between the parties on all the really important issues.

With so many of our laws now being made in the EU does it really matter who has the most seats in our local parliament. Perhaps the closeness of the parties in the polls is an indication of the closeness of their policies, effectively giving the voters no real choice. So please do stop complaining about the voters they are only reflecting the political reality that which ever one wins we will still be governed by the EU, we will still be lumbered with almost unbelievable increased energy costs.

Most of all they will compromise and not make the structural changes to the public sector. The UK will limp along as an uncompetitive country sloy drifting down in terms of wealth, productivity, standards of living and quality of life.

JR: "Some of the advocates of a hung Parliament see it as a way of avoiding hard choices. "

We either make the hard choices voluntarily, or hard choices will be forced upon us.

JR: "so the bargaining has already begun in an unseemly way before the electorate have spoken. "

Perhaps your campaign strategists might consider putting that into the public domain at the next opportunity: – The public can't really make up their mind which they prefer, Labour or Liberals, so the Labour party and the Liberal party have determined that the public don't get a choice.

JR: "they [the greeks] should be grateful that the IMF and the EU are prepared to lend them more at a lower interest rate than the markets demand."

Indeed they should, their commercial interest rates are so high because the risk of return of the money is high. That in turn is because they were crooked and dishonest.

So why did institutions lend money to a country which was crooked/dishonest/lazy ?

It can only be that if push came to shove they expected their agents to ensure the international community stepped in and lent Greece public money to continue servicing their debts .

Average Joe taxpayer always picks up the tab and the money eventually ends up being appropriated by big institutions , just like the bail out of AIG to pay the (word left out) insurance claims of Golman Sachs .

Isn't it about time the worm turned and we refused to be bled dry by these (people-ed) ?

I am reading this morning that a large, private, locally headquartered company, is moving its holding company to Switzerland. It is saying that this move will considerably reduce its tax burden. One of many with similar ideas no doubt.

BTW, "£6 billion is a small sum in a £1.4 trillion economy: less than 0.5%" [JR]. I doubt there is one person in my street who would understand this statement. I have a rule; don't mix multiple prefixes in a report, you loose impact when making comparisons. For instance, £6 billion is a small sum in a £1,400 billion economy. Sorry to be picky, we is Engineers.

I'm starting to wonder whether we have been in a no-win situation all along and that unemployment and debt slavery for the masses is just the innevitable conclusion of globalisation for Western countries .

So far this election has been hijacked by the TV companies and made into a trivial personality contest. The serious economic problems and dangers facing the country have been relegated in importance to questions such as whether the party leader was looking directly into the camera as he was speaking and who "won" the "debate" which we never actually had. I find the whole thing both depressing and worrying because the consequences facing us after this election are so serious. Today we read of a disrespectful Foreign Office memo regarding the Pope's visit which was presumably thought to be terribly funny by whichever clown wrote it. It seems the country is in denial about the parlous state we are in and is descending into a state of thoughtless stupidity. You politicians have just a few more days to bring home the seriousness of the situation.

"If we do not elect a government that is serious about controlling the deficit, the deficit will come to control us."

I've looked for a party to vote for that gives some detailed indication of what measures it would take to balance the books – so far in vain. No wonder 'A pox on all your houses' seems such a popular mantra at the moment.

"Don't mention the cuts" seem to be the watch words of a party (The Conservatives) terrified of frightening the horses. I'm hoping the Conservatives get a bloody nose in the election and out of the ensuing chaos a leader is chosen who is not frightened of horses.

We think Britain may well be back to a 70% turnout this time like 1992 when John Major got approx 14m (41.9%) of the 33.5m votes cast. Given some growth in the electorate since then and the Lib-Dem surge it has bee estimated that the conservatives need now to get a 3% rise in the polls and the vote – to 37/38% – to achieve a clear-cut win.

With 3 million 'definite' and many more potential voters still undecided on how they'll vote the final debate is clearly crucial. Now we ladies have got the hang of this ‘blogging’ lark we hope to contribute this week with our further views on how DC can help ensure that we don't get a hung Parliament but a sound working majority.

Incidentally I’m Jenny and will be responsible for the processing. We shall keep our colleague Sue away from the computer as she’s hoping for a well-hung Parliament she says!

NB. We agree that the current Greek experience is a formidable weapon in the Cameron armoury in response to the accusation of 'scare tactics' if used skillfully.

70% this time still seems to us an achieveable expectation given the current level of interest which, with population growth, might still result in around 33m votes, requiring the conservatives to poll over 12m for a majority .

Greeks should not be offered loans at anything other than market rates, and here's how to bring it about.

The first thing is to stop contributing to the IMF and to call for its demise. The institution was set up to support the Bretton Woods system of fixed exchange rates. Now that has gone, there is no role for the IMF in the modern world.

The second is to bombard the German people with information about the cost to Germany of soft loans to Greece. Not only would a soft Euro loan do Greece a favour but it would push up the rate at which Germany could borrow from the markets. The Bundesbank is already active in German courts to get a soft loan to Greece ruled as contrary to the Constitution of Germany.

The only options open to Greece should be:
(1) Borrow at market rates
(2) Default
(3) Restore the drachma and leave the Eurozone

With any luck, and with a policy that looks after UK interests, we can bring about the start of the Euro's death rattle.

Surely the sensible option to Greece is to sort out its public sector spending.Once this happens the cost of its borrowing will start to drop.

As for Greece leaving the Euro – this will not help them. Devaluing the Pound has imported inflation.

Look at the USA. There are states there with eye watering deficits too. Are you saying that California and or New York should leave the US Dollar too?

As for your last sentence "we can bring about the start of the Euro’s death rattle." – apart from sounding nasty some might argue that "we" have enough of our own debts and problems without making enemies.

As for Britain's "advice" or "bombardment" as you call it I'm sure the Germans (and even maybe the Greeks) would raise an eyebrow at Flat Broke Britain dishing out the advice!

Regarding the IMF it might not be perfect but it is better than nothing.

The USA has a common currency controlled by a common federal government. California and New York will not be allowed to print money to get rid of their deficits. They will be told to put their houses in order – and quite right too.

The IMF encourages poor states and debtor states to carry on borrowing when they shouldn't. That is not "better than nothing".
The international money markets are the right place to borrow if you really must – it is fair to everybody.

The Euro is a common currency that is not controlled by a common government. There are so many nations involved that if such a common government were to be formed, it would be the dominant power in Europe. It has been British foreign policy for centuries to seek a balance of power in Europe, to prevent the emergence of a dominant Continental force.

The break up of the Euro would allow the goal of a Gaullist Europe to be attained – yes to free trade, yes to the Single Market, yes to free capital flows, yes to practical projects like the Trans European Networks. But no to the Euro and Maastricht, Amsterdam, Nice and Lisbon, and no to the automatic free movement of labour – although we can offer that to selected European nations.

You have to remember that Greece has got itself into this position by borrowing heavily for years and practicing deceipt.
We can show a measure of understanding, but not at our expense.

I think a large percentage of those who can vote, are so fed up with all of the Parties (but especially Labour and Conservative who have both been in power) that they feel something different, almost anything different, can do no worse.

In addition both Labour and Conservatives have to a degree lost some of the support of their core voters with wishy washy ideas, policies, statements, and the political correctness of some of their pledges.

The Liberals have always had wishy washy policies so nothing has changed with them really, other than they now have a stage of equal standing.

For many its, who is the least worst option, but it may give us the worst outcome.

The same old gripe by the Greeks as you always get everywhere and one no doubt we will be hearing in the UK soon, "we have been naught, very naughty but we do not see why we should be punished". In fact that is why the polls are so uncertain the electorate are running around trying to anticipate which party will mete out the least punishment. Labour held up better than it was entitled to it's share of the polls at first because they said "stick with us and there will be no pain". They were not really believed but they did manage to convince Joe voter that the Conservatives were sadists. In their bewilderment when the Lib-Dems offered instant salvation they grabbed at it as the new panacea.

In the event of a hung parliament a new election will not be long in coming. Until recently it has been the perceived wisdom that a Labour Lib-Dem pact that would emerge from such a parliament but recent events are starting to make that not as likely. The Conservatives should resist the temptation of going it alone or entering into a coalition, they should bide their time and let others face the troubles ahead. Leave them to rightly take the blame and await an early new election and be swept into power on a tide of disillusionment.

Of course a hung parliament does not, by itself, solve the deficit. Neither, clearly or we would not be here, does a parliament where absolute power goes to the largest (usually) minority. Though there is an argument that a government run by the largest minority is inherently less likely to act responsibly than one with majority support.

Eiither way this is not actually an argument against a "hung" parliament & implications that the Gnomes of Zurich will run screaming hold no water. For generations Switzerland has not only not had single party rule but has had a coalition of all parties. adjusted as the parties gain or lose votes & backed by popular referendums.

The demand by the Lib-Dems for half the cabinet seats is probably an opening gambit. Their opinion poll gains are bigger in the Labour heartlands than in the Tory areas. For them it is encouraging news, as now a bigger prize in with their grasp than being the junior member of a coalition government. That prize is permanently replacing Labour as the main left-of-centre party. For them, this is the time to strike. It is Labour that has failed to protect public services by running up a large structural deficit in the boom years. It is Labour who has betrayed their core supporters by ensuring that public expenditure will be severely constrained for a generation.
The danger for David Cameron is to be unprepared to drive this point home as well this coming Thursday night.

John all common sense stuff as usual but you forget the only other option. We could simply refuse to pay back ANY of the debt, and take back the right to issue our own currency. This could be done in co-operation with many other debtor nations, which is virtually all other nations, therefore the net detrimental effect on trade and commerce could be as good as no existent.

If my company lends money to a customer that either can not pay or will not pay, then I simple lose the money. No bail outs and no sympathy from either my bankers or my own creditors. Such is the way of the world in a FREE MARKET. Which as you surely know is not the type of market either the central banks or our governments have anything to do with.

We the tax payer have long since under-written our own banking establishment. This did not suddenly become fact when LSE indoctrinated and OIL industry puppet Vince Cable happened to mention the fact virtually in private a few years ago. It has indeed been the case for hundreds of years. This country is basically a banking corporation in all but name, run and controlled by the people and their families who have long since owned the entire worlds banking system.

You of course must know this, however you can be safely assured that the vast majority of the public did not and still do not know that their own hard work , and therefore productivity underwrites not only all government debt but also all of the inevitable/potential losses of their own banksters. This is clearly the case otherwise they would have been a peasants/tax payers revolt, not to say murderous revolution many years ago.

I accuse all of our political parties, as well as our entire mass media very much including the BBC, of working in a witting or otherwise massive, systematic conspiracy of silence concerning this long standing issue, over many many decades.

If you don't fully understand the problem, you can't possibly expect to fine a sustainable answer. If you trust people and certain families, who have a well established record of not being at all trustworthy, then you deserve to have the proverbial piss taken out of you time and time again. If you can not, or will not be honest with the people, then you, and your parliamentary friends, on both sides of the commons, fully deserve every gram of distrust you get, and will most surely receive in the future.

"to have some extra front line spending on better schools or healthcare without cuts to pay for it"
No, that is exactly what we do not want.
"More money" simply means more waste on plastic sheeting and waffle about eco-friendly environments. We are, here in Wisbech, about to waste some £25,000,000 on exactly that. The failing comprehensive school, of course, underneath all the hogwash, will remain exactly the same as ever.
And, in order to oversee the "spend" we will need a lot of "officers" with clipboards who will, of course, need some Human Resource Back-up and Training Facilities.
Michael Gove has it exactly right: hand the money per pupil to smaller schools run independently by the parents and let us get on with the job of educating those parents' children. Believe me, if we fail, we will know about it quicker than the government ever will!

My comment does not relate to this particular thread, but I searched in vain for an email address by which I can contact you.

My point is – nobody ever mentions the self-employed. I cannot recall one instance during the current "campaign",

I have been self-employed for over 20 years, and it appears self-employed people are close to invisible.

We are actively discriminated against by the benefits system, pensions etc., yet we do form a major part of the economy.

I was one of the poor s*ds who tried to put together a half-decent pension with Equitable Life. I am now resigned to never trusting an insurance company again, and heading towards life on a state pension (if it still exists by the time I am due to retire).

I recall you saying that the current socialist government does not like the self-employed because they are not taxed at source.

How would Cameron's Conservative government help those self-reliant people called the self-employed?

Or are we just invisible?

Reply: On the contrary, the Conservatives propose a package of lower tax and less regulation, recognising the problems.

The self employed are often ignored because they usually manage to look after themselves.

They advertise their services/skills.
They cost their own work.
They get their own work.
They fund their own Business
They pay their own Taxes.
They pay their own Accountant.
They sort out their own Pensions.
They employ subcontract Labour.
They pay wages (keep records of tax deducted to contract labour for the Inland Revenue).
They fill in government forms.
They are resonsible for their own Health and Safety Policy.
They pay for their own Indemnity Insurance.
Many use a room at home to work from and so by definition have to have a slightly larger house or an outhouse or converted garage.

But they get little in Benefits.

THAT IS WHY THEY HAVE BEEN IGNORED, MOST OF THEM COPE WITH WHAT IS THROWN AT THEM, unlike many who's first cry is what Benefits am I due.

What have this Government done for the past 13 years?

Introduced IR35
The CIS Construction scheme where tax is stopped at source, at a rate greater than the tax paid to Salaried staff, and on which you have to make a reclaim each year from the Inland Revenue.

They have sought at every level to restrict self employment, and so strangled many a green shoot which may have grown to be a successful private business.

Labour do not have a clue how the self employed or private business works or starts, and the effort it takes, that is why career only Politicians should be banned from being an MP.

This Country needs a Hung Parliament like a hole in the head!
The economic reality is that Britain’s AAA credit rating has been placed on probation until the outcome of the General Election. The next Government of whatever hue will be forced to act swiftly to avoid a downgrading of our AAA credit rating, the consequences of which would be catastrophic for everyone. Any downgrade would destabilise the gilts markets, leading to pressure on the pound. Increased interest rates would follow in quick succession resulting in escalating mortgage rates. The loss of confidence in the economy and commerce in general caused by such events would quickly translate into job losses on a grand scale.
A hung Parliament led by a weak Government unable to take the decisive decisions needed, would be the surest way to trigger such events!
We only have to look at what is happening to the Greek economy at present, with two credit downgrades in quick succession, followed by the humiliation of seeing their economy being taken over by the I.M.F.

There is clearly an ill-considered, self indulgent, anti-politics suicidal frenzy going on in the Country at the moment. It is vitally important for people to stop and consider the huge price that each of us would have to pay, if the above scenario came about due to a hung parliament. William Hague put it in a nutshell recently, by saying Britain would likely end up like Greece but without the sunshine.

John all common sense stuff as usual but you forget the only other option. We could simply refuse to pay back ANY of the debt, and take back the right to issue our own currency. This could be done in co-operation with many other debtor nations, which is virtually all other nations, therefore the net detrimental effect on trade and commerce could be as good as no existent.

If my company lends money to a customer that either can not pay or will not pay, then I simple lose the money. No bail outs and no sympathy from either my bankers or my own creditors. Such is the way of the world in a FREE MARKET. Which as you surely know is not the type of market either the central banks or our governments have anything to do with.

We the tax payer have long since under-written our own banking establishment. (personal reference removed) It has indeed been the case for hundreds of years. This country is basically a banking corporation in all but name, run and controlled by the people and their families who have long since owned the entire worlds banking system.

You of course must know this, however you can be safely assured that the vast majority of the public did not and still do not know that their own hard work , and therefore productivity underwrites not only all government debt but also all of the inevitable/potential losses of their own banksters. This is clearly the case otherwise they would have been a peasants/tax payers revolt, not to say murderous revolution many years ago.

I accuse all of our political parties, as well as our entire mass media very much including the BBC, of working in a witting or otherwise massive, systematic conspiracy of silence concerning this long standing issue, over many many decades.

If you don't fully understand the problem, you can't possibly expect to fine a sustainable answer. If you trust people and certain families, who have a well established record of not being at all trustworthy, then you deserve to have the proverbial piss taken out of you time and time again. If you can not, or will not be honest with the people, then you, and your parliamentary friends, on both sides of the commons, fully deserve every gram of distrust you get, and will most surely receive in the future.

I am reading this morning that a large, private, locally headquartered company, is moving its holding company to Switzerland. It is saying that this move will considerably reduce its tax burden. One of many with similar ideas no doubt.

BTW, "£6 billion is a small sum in a £1.4 trillion economy: less than 0.5%" [JR]. I doubt there is one person in my street who would understand this statement. I have a rule; don't mix multiple prefixes in a report, you loose impact when making comparisons. For instance, £6 billion is a small sum in a £1,400 billion economy. Sorry to be picky, we is Engineers.

Of course anyone with a small party with minority support, loves the idea of a hung parliament, because it is their only chance to punch significantly above their weight.

The real problem is electoral reform. The smaller parties want it because it gives them more power and a hung parliament is likely to mean that electoral reform is thrust upon us.

I also find it unbelievable that the largest party in parliament could easily be the least popular of the three main parties.

I have an alternative electoral reform which simulates first past the post results, but removes the unfairness caused by constituency based voting. It would mean that only the most popular party would always have the most seats and that working majorities are as achievable as they have been under First Past the Post. It would also mean also that Scottish, Welsh and Northern Irish voters would be voting in the same election.

If the Conservatives need a policy on Electoral reform, I might just have the policy for them.

This Country needs a Hung Parliament like a hole in the head!
The economic reality is that Britain’s AAA credit rating has been placed on probation until the outcome of the General Election. The next Government of whatever hue will be forced to act swiftly to avoid a downgrading of our AAA credit rating, the consequences of which would be catastrophic for everyone. Any downgrade would destabilise the gilts markets, leading to pressure on the pound. Increased interest rates would follow in quick succession resulting in escalating mortgage rates. The loss of confidence in the economy and commerce in general caused by such events would quickly translate into job losses on a grand scale.
A hung Parliament led by a weak Government unable to take the decisive decisions needed, would be the surest way to trigger such events!
We only have to look at what is happening to the Greek economy at present, with two credit downgrades in quick succession, followed by the humiliation of seeing their economy being taken over by the I.M.F.

There is clearly an ill-considered, self indulgent, anti-politics suicidal frenzy going on in the Country at the moment. It is vitally important for people to stop and consider the huge price that each of us would have to pay, if the above scenario came about due to a hung parliament. William Hague put it in a nutshell recently, by saying Britain would likely end up like Greece but without the sunshine.

About John Redwood

John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.